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CPI

December 2015

The CPI in the year to December 2015 increased by 0.2%, up from 0.1%
in the year to November.

Downward pressure on prices came from lower alcohol and tobacco
prices, which was cancelled out by upward pressure from increased
transport costs and motor fuels and services.

Over the year, most downward pressure came from lower food and
non-alcoholic beveridges.

Contributions to CPI change (12 months to December 2015)

The news that inflation is still hovering around zero percent, coupled with pessimistic expectations about about growth prospects in China, is a clear indication that an interest rate rise is
unlikely in the medium term.

Inflation | amCharts

Previous reports

September 2015

The CPI fell by 0.1% in the year to September 2015 compared with
virtually no change over the previous 12-month period to August 2015.

The major contributors to the slight fall came from motoring costs,
and the lower than usual rise in the prices of clothing and footwear.

Although UK inflation has been hovering close to zero for nearly a
year, few observers fear a European-style deflation given the underlying
strength of consumer demand buoyed up by rising earnings. Real wages
have been growing consistently since August 2014, so any current
deflationary pressure is from the supply-side of the economy, through
lower food and fuel costs, rather than from weaker demand. The
likelihood is that interest rates will remain on hold again – at least
until something more significant appears.

April 2015

The UK’s CPI fell by 0.1% in the 12 months to April 2015, the first
time that the CPI has been negative since its introduction in 1996, and
the first recorded fall in the price level since 1960.

According to the
ONS, the falling rate of inflation in recent months is due largely
to falling prices for food and motor fuels. While the oil prices are now
on the rise, prices at the pumps are still lower than a year ago, and
pulling the rate of inflation down. Over the last few months decreases
in oil prices and other commodity prices combined with increased
competition between the major
supermarkets have
all contributed to the downward price-trend, with falling transport
costs pushing the inflation figure into negative territory in April.
Economists identify this type of
deflation
as ‘good’ deflation in that it is driven by beneficial factors,
including falling fuel prices. If deflation is triggered by demand-side
factors, such as falling household spending and rising unemployment,
‘bad’ deflation can set in and become embedded in the economy. However,
for the time being, at least, the UK’s deflation is not a cause for
concern, and it may well come to an end fairly quickly as the effects of
falling prices for these key items drop out of the index.

February 2015

Latest figures released by the
ONS show that the CPI
remained unchanged, at 0.0%, in the year to February 2015, down from 0.3% in
January 2015 - the lowest inflation rate since records began.
The main contributions to the slowdown came from recreational goods,
incuding data processing equipment, books and games, and toys, food and
furniture, and furnishings. The ONS reported that there were no large
upward effects to offset these changes.

January 2015

Latest figures released by the
ONS show that the CPI grew by 0.3% in the year to January 2015, down from 0.5% in December 2014.
Falls in motor fuel and food prices were the main contributors to the lowest rate of inflation
since modern records began. The CPIH grew by 0.4% in the year to January 2015.

December 2014

Latest figures released by the
ONS indicate that the CPI grew by just 0.5% in the year to
December 2014 - down from 1.0% in November.

The main reason for the relatively
dramatic fall was that gas and electricity price increases which
occurred in December 2013 dropped out of the index. This
downward effect was reinforced by the continued drop in fuel
prices. The Governor of the
Bank of England is now required to
write a letter of explanation to the Chancellor, given that the
CPI has dropped out of the lower acceptable level of 1% (based
on the inflation target of 2% (+/- 1%).

The CPIH grew by 0.6% in the year.

The news certainly suggests that interest rates are unlikely to
increase in the short term. It also prompts fears of
deflation.
If the CPI does drop into negative territory there is a possibility that
consumers will postpone consumption in the expectation that prices will
fall further. However, there seems little evidence at present that this
will happen and the UK will not enter a Japanese-EU style deflationary
episode. There is a limit to which oil prices will fall, and consumer
confidence is buoyant with earners experiencing a real increase in their
wages. Many of the goods that have dropped in price are relatively
inelastically demanded (food and petrol for example) - hence it is very
unlikely that consumption will be delayed at all. Money wages will 'go
further' which is likely to boost spending and put the brakes on further
price deflation once it approaches zero.

November 2014

CPI falls to 1%.

October 2014

CPI stands at 1.3%.

September 2014

The Consumer Prices Index (CPI) in the year to September 2014 grew by 1.2%
- its lowest level for 5 years.

The
main
contributions to the inflation slowdown cam from lower fuel and
transport costs, together with falls in the prices of recreational
goods. The
CPIH also grew by 1.2% in the year to September 2014.

August 2014

The Consumer Prices Index (CPI) for the year to August grew by
1.5%, down from 1.6% in July. Falls in the prices of motor fuels and
food & non-alcoholic drinks provided the largest downward
contributions to the change in the rate. While clothing, transport
and alcohol prices put upward pressure on the CPI, this was more
than offset by downward pressure from fuels, food and non-alcoholic
drinks. The CPIH also grew by 1.5% while the RPIJ grew by 1.8%.

July 2014

The Consumer Prices Index grew by 1.6% in the year to July - down
from 1.9%. Downward pressure came from clothing,
alcohol, financial services and food, with transport the major
contributor to upward pressure. The CPIH grew by 1.5% and the
RPIJ grew by 1.8%, down from 2.0% in June.

June 2014

The Consumer Prices Index (CPI) grew by 1.9% in the 12 months to June
2014, up from 1.5% in May. Increases in the prices of clothing, food,
non-alcoholic drinks and air transport accounted for a significant
proportion of the rise. The CPIH (which includes the costs of
housing services associated with owning, maintaining and living in
one’s own home) also grew - up to 1.8% in the year to June 2014,
from 1.4% in May.

May 2014

The CPI grew by 1.5% in the 12 months to May
2014, down from 1.8% in April. The
ONS reported that reductions in transport costs, especially air fares,
provided the largest contribution to the decrease in the rate. Food and
non-alcoholic drinks, and clothing also contributed to the reduction in
inflation. The CPIH grew by 1.4% in the year to May 2014, down from 1.6% in
April while the RPIJ grew by 1.7%.

April 2014

The annual rate of inflation increased from 1.6%
in March to 1.8% in April 2014. This was largely due to increased
transport costs including air and sea fares. Were it not for a
fall in food prices, the rate would have been higher. This is the
first increase in the CPI since January 2103.